All posts tagged Bribes

Latin America’s reactions to the massive transnational scandals involving the Brazilian construction giant Odebrecht and its subsidiary Braskem are an important sign of progress in anticorruption efforts. But across the region, courts’ reluctance to challenge elites remains a major obstacle to deeper accountability. Brazilian, Swiss, and U.S. authorities’ announcement in December 2016 of a multibillion dollar global corruption settlement with the Brazilian firms – valued at $3.5 to 4.5 billion – was remarkable for being the largest in history. It was also shocking for its revelations: Odebrecht admitted using a variety of elaborate subterfuges to launder bribe payments and corrupt proceeds, including by setting up a bribe department and buying an offshore bank. Graft allowed executives to rewrite laws in their own favor, and guaranteed that the right officials were in the right place when public contracts were up for bidding. The firms netted $3.60 for every $1 they spent on bribes in Brazil, and admitted to paying $788 million in bribes across twelve countries, including ten in Latin America.

The political salience of the charges is roughly similar in all ten Latin countries, muddying the reputations of presidents or former presidents in Argentina, Colombia, the Dominican Republic, Peru, Panama, Venezuela and, of course, Brazil. Ministers and high-level officials have been implicated in the remaining countries: Ecuador, Guatemala, and Mexico. Nearly one year after the settlement, it is time to ask how well law enforcement and judicial processes are resolving the allegations against these high-powered public and private sector elites.

In a paper forthcoming in Daedalus, I argue that accountability can be thought of as the outcome of a basic equation – A = (T + O + S) * (E – D) – combining transparency (T), defined in its most essential sense as public access to information about the government’s work; oversight (O), meaning that government functions are susceptible to surveillance that gives public or private agents the right to intensively evaluate the government’s performance; and sanction (S), effectively punishing wrongdoing and establishing societal norms to their rightful place. These are tempered by institutional effectiveness (E) – understood as the outcome of state capacity, relevant laws and procedures, and citizen engagement – and political dominance (D), which diminishes the incentives for active oversight or energetic sanction. The graph above uses a combination of data points from the World Justice Project to measure each of the five variables.

The comparison yields mixed findings. On average, the nations implicated in the Odebrecht settlement do quite well on transparency, effectiveness, and political dominance – the outcome of a generation of democratic rule (with Venezuela being the obvious outlier). But all ten countries perform comparatively poorly when it comes to oversight, and abysmally when the criterion is sanction. This does not bode well for accountability, especially if we consider that among the Odebrecht Latin Ten, the highest-scoring country on the sanction criteria is Argentina, whose score is still below the middle-income country average. In Brazil, where trial courts have led the way in imposing sanctions on business elites, political leaders are nonetheless protected against meaningful sanctions by an arcane system of privileged standing in the high courts.

Latin American judicial systems – long rigged to protect local economic and political elites – remain the principal obstacle to accountability. The Odebrecht settlement signaled that a new day has arrived: new international norms and law enforcement across multiple jurisdictions are likely to continue to upset the cozy arrangements that have protected the region’s elites from corruption revelations for decades. But true accountability will only come when local courts and prosecutors are empowered to effectively punish corrupt elites. That implies changes in legal procedure, new laws, and most importantly, political will. Perhaps the Odebrecht case will galvanize domestic public opinion and mobilize policymakers about the need to improve local justice systems. The enormous costs of corruption revealed by the Odebrecht settlement suggest that change cannot come soon enough.

November 6, 2017

* Matthew Taylor is Associate Professor at the School of International Service at American University. His forthcoming article in Daedalus is entitled “Getting to Accountability: A Framework for Planning and Implementing Anticorruption Strategies.”